One of the key issues facing legislators as they crunch numbers to prepare the state budgets for fiscal 2014 is whether to approve a pay raise for teachers and school employees, who have not received a cost-of-living increase since a 7 percent raise in 2008. The Alabama Education Association has called for a 10 percent raise over a three-year period, with 5 percent coming in fiscal 2014.

“There is no room for a 10 percent pay raise. There is no room for a 5 percent pay raise,” said Rep. Jay Love, R-Montgomery, chairman of the House Ways and Means Education Committee.

Love also said, “If there is room for a pay raise, we will provide a pay raise.”

Finance Director Davis gave revenue projections for the General Fund and the Education Trust Fund for fiscal 2014 that were slightly higher than the projections by Green of the LFO.

Davis projected that the ETF would have revenues of $5.825 billion for the year that begins Oct. 1. Green projected about $5.786 billion, about $40 million less.

Both figures exceed the $5.55 billion that the LFO said would be spent this year. Green’s projection would be about $238 million more than this year’s spending.

Despite the expected increase, Davis urged legislators to be cautious in preparing the budgets to avoid the need for proration, or mid-year budget cuts that are required when revenues fall short of projections. That has happened to the education budget during six budget years since 2000.

In 2011, legislators adopted what is called the rolling reserve act, which caps spending from the Education Trust Fund based partly on the 15-year history of revenues. The intent was to avoid proration.

Green said the cap set by the rolling reserve act for fiscal 2014 is $6.01 billion.

“Our revenue estimate is lower than our cap, so we have to be careful we don’t go into proration,” Davis said.

As for the General Fund, Davis projected revenues for fiscal 2014 of $1.74 billion, compared to Green’s estimate of $1.66 billion, a difference of about $86 million.

Davis said that difference aside, the bottom line is that revenues to the General Fund are not growing.

Green’s projected revenue amount for fiscal 2014 would be about $28 million less than spending from the General Fund in fiscal 2013, not counting some one-time spending items from 2013.

Senate General Fund chairman Sen. Arthur Orr, R-Decatur, said the budget numbers were not a surprise.

Revenues are essentially flat, he said, while the state is facing growing costs in Medicaid, healthcare, insurance and corrections.

"That could mean cuts in other agencies to take care of more pressing needs," Orr said.

Davis is expected to present the governor's proposed budget later this week.

Davis noted that a number of state programs have grown as the General Fund has declined in recent years. For example, there were about 900,000 Medicaid recipients in the state in 2012, up from about 670,000 in 2002.

“We continue to struggle to deal with issues related to providing quality services for Medicaid recipients,” Davis said. “Our ability as a state to fund Medicaid is really stretching our resources.”

Enrollment in Alabama’s Children’s Health Insurance Program, known as ALL Kids, has grown to more than 85,000 from just more than 50,000 a decade ago.

Davis quoted some statistics on the state’s economic health. She said the seasonally adjusted unemployment rate, which stood at 7.1 percent in December, was lower than surrounding states.

She said the state’s growth in Real Gross Domestic Product is roughly on pace with the national rate. Both were at 2.1 percent for 2012, according to her presentation.

She also noted a decline in the number of state employees, from more than 39,000 in fiscal 2010 to slightly fewer than 35,000 as of Jan. 31.

“There is some natural attrition where we are losing state employees,” Davis said.

Davis reported that the state’s prison population has grown from 24,060 to 25,376 from 2002 to 2012, while the number of corrections officers decreased from 2,669 to 2,183 during the same period. That means the ratio of inmates to officers rose from about 9 to 1 to about 12 to 1.

Green reported that the state appropriated a total of $10.6 billion in state funds in fiscal 2013. Here’s how the spending broke down: